o r g a n i z at i o n

may 2008

Why multinationals
struggle to manage talent
A survey shows a strong correlation between financial performance and best
practices for managing talent globally.

Matthew Guthridge and Asmus B. Komm

Article
at a
glance

Global corporations are struggling to manage their talent effectively, new McKinsey research
shows.
A survey of some very well-known multinationals reveals barriers to achieving cultural
diversity, to establishing globally consistent HR processes, and to promoting mobility
between countries.
The findings show a strong correlation between financial performance as measured by
profit per employee and companies that achieved the best scores on a survey of their globaltalent-management practices.

Managing talent in a global organization is more complex and demanding than it is

in a national businessand few major worldwide corporations have risen to the

challenge.
A McKinsey survey of managers at some of the worlds best-known multinationals
covered a range of sectors and all the main geographies. Our findings suggest that
the movement of employees between countries is still surprisingly limited and that
many people tempted to relocate fear that doing so will damage their career
prospects. Yet companies that can satisfy their global talent needs and overcome
cultural and other silo-based barriers tend to outperform those that dont.
Weve long observed that global corporations grapple with a more difficult talent
agenda than their domestic counterpartspartly because they need to share
resources and knowledge across a number of business units and countries, partly
because of the especially demanding nature of global leadership. To find out more,
we undertook in-depth interviews with executives at 11 major global corporations
and separately invited senior managers at 22 global companies to participate in an
online survey investigating how effectively they manage their talent. More than 450
people, ranging from CEOs and other directors to senior managers, including
human-resources (HR) professionals, took part in the survey.
The responses confirmed impressions from the interviews that companies now
struggle on a number of talent-management fronts, such as achieving greater
cultural diversity, overcoming barriers to international mobility, and establishing
consistent HR processes in different geographical units.
Despite the value companies claim to place on international management experience,
the senior managers who took the survey had made, on average, only 1.5
cross-border moves during their careers, as against an average of 2 for managers at
the top-performing companies. Interestingly, we found that the respondents had
also moved, on average, 1.7 times between different divisions within the same
geography but only 1.3 times between different functionsanother sign that
movement from silo to silo is still limited.
Participants cited several personal disincentives to global mobility, but one of the
most significant was the expectation that employees would be demoted after
repatriation to their home location. Overseas experience is not taken seriously and
not taken advantage of, commented one senior manager. Much valuable
experience dissipates because companies have a habit of ignoring input from
returnees, and many leave. The quality of the support for mobility a company
provides (for instance, assistance with housing and the logistical aspects of a move)
also plays a decisive role in determining how positive or challenging an overseas
assignment is for expatriates.

Perhaps the most provocative finding from the research was the relationship between
financial performance, as measured by profit per employee,1 and ten dimensions of
global talent management. Companies scoring in the top third of the survey (when
all ten dimensions were combined) earned significantly higher profit per employee
than those in the bottom third (Exhibit 1). The correlations were particularly
striking in three areas: the creation of globally consistent talent evaluation processes,
the management of cultural diversity, and the mobility of global leaders. Companies
achieving scores in the top third in any of these three areas had a 70 percent chance o f
achieving top-third financial performance (Exhibit 2). Companies scoring in the
bottom third of the survey in these three areas had a significantly lower probability
of being top performers, particularly if the company had inconsistent global talent
processes. Although providing no evidence of true causality and lacking a
longitudinal perspective, the strong associations between company financial
performance and these global-talent-management practices strengthen our belief
that these are important areas on which businesses and HR leaders should focus
their attention.
EX HI B IT 1
The payoff

EX HI B IT 2
Best practices

Global consistency in a companys talent evaluation processes is important, because

for mobility to succeed, line managers need to feel confident that employees
transferring into their units from other parts of the organization meet the same
standards that their own people do. Moreover, company support and training is
vital to the promotion of diversity. HR managers stressed the need for expatriates to
learn more about the culture of the countries they transfer to than just the local
language. If you have to choose, explained one HR director, its more important
to have an open-minded leader than to have someone with the right language
skills.
In our view the key implication of the research is that companies should focus hard
on rotating talent globally across divisions and geographies. Not only will this
rotation support the development of company talent, it will also promote greater
cultural awareness and diversity. The research further examined why some
companies are better than others at developing global talent in this way. It found

that those with top managers and promotion systems that actively encourage their
people to gain international experienceand provide managers with incentives to
share their talent with other unitswere roughly twice as likely to have effective
global mobility practices than those that dont (Exhibit 3).
EX HI B IT 3
Standing out from the crowd

Global companies should consider devoting more resources and

senior-management time to liberating talent trapped in national silos and more
wholeheartedly supporting global-mobility programs. Instilling a common set of
talent evaluation processes throughout the worldespecially standardized
individual performance evaluationswill underpin this effort and build the
confidence of line managers.
More and more companies are stepping up their international revenues, their
overseas customer base, and their nondomestic workforce. What our research
suggests is that many of them need to match these achievements with truly global
talent-management attitudes and practices.

About the Authors

Matt Guthridge is an associate principal in McKinseys London office, and Asmus Komm is a principal in the
Hamburg office.
Notes

See Lowell L. Bryan, The new metrics of corporate performance: Profit per employee, mckinseyquarterly.com,
February 2007.

Related Articles on mckinseyquarterly.com

Making talent a strategic priority
The people problem in talent management
The new metrics of corporate performance: Profit per employee

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